Taxes on Rental Income in Canada: A Landlord's Guide

If you collect rent, the Canada Revenue Agency wants to know. Rental income is taxable and must be reported on your tax return — but the good news is you can deduct a long list of eligible expenses against it, often reducing your tax bill substantially. This guide explains how rental income tax works in Canada and what you can legitimately write off.

Key takeaways

• Rental income is taxable and must be reported to the CRA each year.
• You're taxed on net rental income — rent collected minus eligible expenses.
• Deductible expenses include mortgage interest, property tax, insurance, repairs and management fees.
• Only the interest portion of your mortgage payment is deductible — not the principal.
• Keep every receipt; the CRA can ask you to support your claims.

How rental income is taxed

In Canada, rent you receive is treated as income and added to your other income for the year, then taxed at your marginal rate. But you don't pay tax on the gross rent — you pay tax on your net rental income, which is the rent you collect minus the eligible expenses you incurred to earn it.

That distinction is everything. Tracking and claiming your expenses is what separates a heavily taxed rental from a tax-efficient one. This is a core part of running a rental well, as covered in our pillar guide on how to become a landlord in Ontario.

The basic formula

Net rental income = total rent collected − eligible expenses. You report and pay tax on the net figure, not the gross rent.

What you can deduct

The CRA lets you deduct reasonable expenses incurred to earn rental income. Some are deducted in full the year you pay them (current expenses); larger improvements that add lasting value are capitalized and deducted gradually. Here are the most common deductions Canadian landlords claim:

The mortgage interest trap

One of the most common mistakes new landlords make is deducting their whole mortgage payment. You can only deduct the interest portion — the principal you repay each month is not an expense, because it's building your equity. Your lender's annual statement breaks this out for you.

Keeping records and avoiding surprises

The CRA can ask you to support any claim, so keep organized records all year — lease agreements, rent receipts, expense invoices, and your mortgage interest statement. A simple spreadsheet plus a folder of receipts is enough for most single-property landlords.

• Record every rent payment received and the date.
• Keep receipts for all repairs, supplies and services.
• Separate current expenses (deduct now) from capital improvements (deduct over time).
• Hold on to records for at least six years.

Insurance is both protection and a deduction

Your landlord insurance premium is a deductible expense — one of several reasons it's a smart line item rather than a cost to skip.

How this fits your bigger picture

Because net income — not gross rent — drives your return, expenses and pricing both matter. Set rent correctly with our guide to setting the right rent price, and weigh the whole picture in is being a landlord worth it. For complex situations — multiple properties, incorporation, or selling — talk to a qualified accountant.

Buying a rental? Get the industry's highest Cashback Rebate

HOMEH is a licensed Ontario brokerage giving eligible buyers the industry's highest Cashback Rebate on a purchase — money you can put toward your investment. Browse income properties on HOMEH listings or list your rental on the HOMEH landlords page.